Public Expenditure on Supply Reduction Policies

PUBLIC PUBLIC POLICIES ON SUPPLY SUPPLY ON REDUCTION EXPENDITURE EXPENDITURE

Authors: Authors: Sania Mikulic Sergey Tsarev Sergey Laura Piscociu Laura Thomas KattauThomas Fivos Papamalis Fivos Fatima Trigueiros Fatima Claudia Costa StortiClaudia Costa Anne Line Bretteville-Jensen Anne

PREMS 062717 PUBLIC EXPENDITURE ON SUPPLY REDUCTION POLICIES

Authors: Anne Line Bretteville-Jensen Norwegian Institute of Public Health, Oslo Claudia Costa Storti EMCDDA Thomas Kattau Pompidou Group Sania Mikulic Office for combating drugs abuse Government of the Republic of Croatia, Zagreb Fatima Trigueiros General Directorate for Interventions on Addictive Behaviours and Dependencies, Lisbon Fivos Papamalis Advisor to the Greek National Drug Coordinator, Athens Laura Piscociu Romanian National Anti-Drug Agency, Bucharest Sergey Tsarev State Medical Institution “Chapaevsk Narkology Hospital”, Samara

Council of Europe The opinions expressed in this work are the responsibility of the authors and do not necessarily reflect the official policy of the Council of Europe or the Pompidou Group. All requests concerning the reproduction or translation of all or part of this document should be addressed to the Directorate of Communication (F-67075 Strasbourg Cedex or [email protected]). All other correspondence concerning this document should be addressed to the Pompidou Group. Cover and layout: Documents and Publications Production Department (SPDP), Council of Europe This publication has not been copy- edited by the SPDP Editorial Unit to correct typographical and grammatical errors. © Council of Europe, May 2017 Printed at the Council of Europe Contents

FOREWORD 5 EXECUTIVE SUMMARY 6 ACKNOWLEDGEMENTS 7 INTRODUCTION 8 DEFINING CONCEPTS 10 Public expenditure 10 Drug-related public expenditure 10 Public expenditure on supply reduction initiatives 10 EMPIRICAL ESTIMATES OF DEMAND AND SUPPLY POLICY EXPENDITURE 11 STEPS IN COST ESTIMATION AND ANALYSIS 12 Defining the scope and objects 12 Making an inventory of service providers 12 Mapping financing entities 12 Data collection 12 Classifying and identifying data on drug-related spending 13 Extracting expenditure data from sources: labelled and unlabelled expenditure 13 Reporting the value of estimates 15 EXAMPLES OF SECTORIAL MODELS 16 Police 16 Customs 16 Court systems 17 Prisons 17 EXAMPLES OF NATIONAL STUDIES 18 Croatia 18 Belgium 18 Italy 18 France 19 Luxembourg 19 Russia 19 Portugal 19 Other national studies 19 INTERNATIONAL DATABASES USED TO MODEL DRUG-RELATED PUBLIC EXPENDITURE 20 CONCLUSIONS 21 RECOMMENDATIONS 22 GLOSSARY 23 REFERENCES 25 APPENDIX 1 – AVAILABLE DATABASES AND POTENTIAL INDICATORS FOR DRUG-RELATED PUBLIC EXPENDITURES 27 APPENDIX 2 – THE INTERNATIONAL CLASSIFICATION OF THE FUNCTIONS OF GOVERNMENT (COFOG) 30 APPENDIX 3 – SUMMARY TABLES: DATA FROM INTERNATIONAL DATABASES 31 ACRONYMS 36 TABLE REFERENCES 36

► Page 3

Foreword

confirmed political will to address the drugs are available for European countries. To facilitate and problem in Europe lies not only in the develop- promote future empirical expenditure studies, relevant A ment of appropriate policies, but in the amount data sources and methodologies applied in empirical of public funds assigned to implement cost effective estimations are listed and discussed. policies. Currently, however, analysing what these This publication brings together the findings of wider funds are is still difficult. Information and data are study conducted by the Pompidou Group in cooper- still sparse and national estimates tend to neither use ation with the EMCDDA seeking to identify the unin- comparable definitions nor agreed methodologies. tended effects and associated costs of drug control Supply reduction is an approach used for addressing policies. The aim of this publication is threefold. First, the illicit drug phenomena. It comprises the whole increase international awareness about the impor- system of laws, regulatory measures, courses of action tance of estimating public expenditure on supply and funding priorities intended to reduce the avail- reduction initiatives. Second, stress the importance ability of illegal drugs. The EU Drugs Strategy (2013- of harmonizing definitions and increasing availability, 2020) sets the dissemination of the evaluation of comparability and reliability of data as well as methods interventions results as a priority. Providing sound for sound estimates. Third, contribute to developing methods to estimate drug-related public expenditure sound estimation practices to obtain accurate, com- is an important step in this direction. Such estimates plete and reliable drug policy evaluations. aim to calculate the amount of resources spent on Promoting international cooperation and develop- implementing targeted interventions and may reveal ing of effective working partnerships between drug the extent to which policy intentions are reflected in international organizations, policy makers, specialists relevant budgets. in accountancy, law enforcement agents and those This publication is a first step towards a systematic in charge of economic modelling is the way forward. analysis. It examines a set of recent and representative While recognising the limitations imposed by currently attempts to estimate public expenditure on supply available data sets, this publication sheds light on reduction policies. Consequently, it proposes a com- current practice and, in doing so, suggests areas of mon set of definitions aiming to establish a common focus for future desired methodological development. basis for understanding such complex subject matter In this way it hopes that the estimation of drug-related and to facilitate comparability in three main dimen- public expenditure and policy evaluation will move sions: time, policy and countries. Although the study forward, in Europe. For continuous improvements to is mainly focused in supply reduction expenditures, take place, however, it is essential that partnerships are it reports data on the balance between spending on extended and maintained with the goal of developing demand and on supply reduction, when estimates good practices, standards and guidelines in this field.

Jan Malinowski Alexis Goosdeel Executive Secretary of the Pompidou Group Director of the EMCDDA

► Page 5 Executive summary

upply reduction has been normally used for This report takes a first step towards a systematic addressing the illicit drug phenomena in Europe. analysis, by examining a set of representative attempts S It uses the whole system of laws, regulatory mea- to estimate public expenditure on supply reduction sures, courses of action and funding priorities used interventions. It proposes a common set of defini- by governments and their representatives. tions, aiming to establish a common basis for under- Evaluating drug policy is an integral part of a cost-ef- standing this topic and facilitating comparability in ficient approach to tackle illicit drugs. Assessing and three main dimensions: time, policy and countries. estimating drug-related public expenditure is a first Although it is mainly confined to supply reduction step in evaluations exercises. Estimates aim to cal- expenditures, in order to set the context, it describes culate the amount of resources spent, or needed, to the proportion that total drug-related expenditure implement these targeted interventions. Therefore, represents of national public spending and; presents estimates may reveal to what extent policy intentions the balance between demand and supply reduction are reflected in relevant budgets, if considered that spending for a number of European countries. With the size of the phenomena and resources available the aim of facilitating and promoting future empirical condition choices. expenditure studies and of setting the ground for the development of good practices, relevant data sources Until now, estimates for the funds spent by govern- and methodologies applied are listed and discussed ments in this field are sparse. They have been mostly and examples of sectorial models of public spending produced at national level and applied different defi- are selectively provided. Finally, some conclusions and nitions, with no commonly agreed methodologies or recommendations are offered. comparable datasets. Uncertainty about the most appropriate economic models to use also exists. These factors have constituted effective barriers to rapid developments of policy evaluation and cost-effective analysis in the field.

► Page 6 Acknowledgements

he authors would like to thank the EMCDDA and the Pompidou Group Secretariat for the support ren- dered in the preparation of this publication. In addition gratitude is expressed to the following experts T who contributed to the content of this publication in the context of their work in the Pompidou Group’s expert group on effects and associated costs of drug control policies:

Peyman Altan Turkish Public Health Institution, Ankara, Turkey Pavel Bem Charles University, Prague, Czech Republic Torbjørn Brekke Senior Adviser, Ministry of Health and Care Services, Norway Yossi Harel-Fisch Bar-Ilan University, Ramat Gan, Israel Elena Hedoux Pompidou Group, Council of Europe Janusz Sieroslawski Institute of Psychiatry & Neurology, Warsaw

► Page 7 Introduction

he aim of this publication is threefold. Firstly, to the whole system of laws, regulatory measures, courses increase international awareness concerning the of action and funding priorities concerning illicit drugs T importance of estimating public expenditure on put into effect by a government or its representatives supply reduction initiatives. Secondly, to raise public (law enforcement officers such as police and customs awareness of the need to agree upon harmonising officers, judges, prison guards, etc.). Reduced drug definitions and increasing the availability, compa- availability and accessibility is achieved through a rability and reliability of data, as well as methods for disruption of illicit drug trafficking; dismantling of producing sound estimates. And thirdly, to contribute the criminal organisations that are involved in drug to developing national and international estimation production and trafficking; efficient use of the criminal practices with a view to obtaining accurate, complete, justice system; effective intelligence-led law enforce- reliable and comparable drug policy evaluations. ment and increased intelligence sharing; and a focus on large-scale, cross-border and organised drug-re- The target audience includes officials involved in the lated crime (EMCDDA, 2016). evaluation of drug policy; entities wishing to evaluate drug policy priorities, develop drug policy strategies As stated in documents such as the 2013-2020 and action plans and analyse their economic, social European Union Drug Strategy (Council of the and political consequences; accounting authorities; European Union, 2013) and the EU Action Plan on entities seeking funds to finance their service provi- Drugs 2013-2016 (Official Journal of the European sion; and researchers. Union, 2013), an evaluation of drug policy is an inte- Most European countries have a national drug policy gral part of the approach to combating illicit drugs. presented in a drug strategy document (EMCDDA, Estimation of drug-related public expenditure can be 2015). National drug strategies tend to reflect a bal- seen as a first step in this direction. Public expenditure anced approach between drug demand and drug estimates aim to calculate the amount of resources supply reduction (EMCDDA, 2016). An optimal balance, spent, or needed, to implement targeted interventions however, may not imply that the two approaches in a particular policy field and may reveal to what receive an equal share of resources and attention. extent policy intentions are reflected in the relevant Instead, it will depend on country specific priorities budgets and are conditioned by the size and charac- and aims for the different drug policy sectors, as well teristics of the drug phenomenon. as on the relative price of implementing each activity in a cost-effective manner. Accurate estimates of public spending on implementing drug policy initiatives will help policymakers to Supply reduction is often the main approach used plan relevant interventions and make the required for addressing the illicit drug problem. Nonetheless, funds available to the authorities in charge of policy efforts aimed at reducing demand (mainly prevention implementation. A thorough assessment of drug and treatment measures) are also important and policy expenditures will also contribute to improved harm reduction initiatives have gained in significance transparency and accountability of public institutions. over the years. In addition, the effects of supply and Estimates may provide information on factors such demand reduction efforts are often interrelated. For as the relative importance of demand and supply instance, successfully reducing drug availability may expenditures and enable cross-country comparisons influence the consumption of drugs and also have an of the level and composition of spending on the fight impact on problem drug use and adverse drug use against illicit drugs (EMCDDA, 2008). Sound planning, consequences. improved knowledge of the resources allocated to this The overarching objective of supply reduction is a policy field, and cost-effective resource allocation are measurable reduction in the availability and accessibil- particularly necessary in times of economic downturn ity to illicit drugs. Supply reduction initiatives comprise when fewer resources are available.

► Page 8 A subsequent step would be to systematically compare useful and desirable. This report takes the first step public expenditure and other possible costs to the pol- towards a systematic analysis by examining a num- icy’s measured outputs or results. Depending on how ber of representative attempts to estimate public the results are defined and measured, a cost-benefit or expenditure on supply reduction policies. It proposes cost-effectiveness analysis can be conducted (see glos- a common set of definitions to be used for public sary). In this case, resource inputs (the costs of labour, expenditure assessment and evaluation. In addition, capital and/or equipment) are linked to intermediate it aims to establish a common basis for understanding outcomes (e.g. number of drug dealers arrested); final this complex subject and to facilitate comparabil- outputs (e.g. lives saved, life years gained, number of ity in three main areas: time, policy and countries drug users, reduction in drug-related harm, percent- concerned. Although, the report mainly focuses on age reduction in crimes committed); or policy goals. supply reduction expenditures, in order to contex- Irrespective of the chosen output measures, however, tualise them, it describes the proportion that total public expenditure will be a central cost factor, since drug-related expenditure represents of gross domestic governments constitute the main provider of drug product. It also shows how spending is balanced supply reduction services in Europe. between demand and supply reduction initiatives A thorough economic evaluation can provide pol- in a number of European countries. To facilitate and icymakers with the information required to make promote future empirical expenditure studies, the well-informed decisions. Although the data and a relevant data sources and methodologies applied in quantification of all the outcomes and cost elements making empirical estimates are listed and discussed. required for conducting the most comprehensive Examples of sectorial models of public spending and analyses are currently not available, a somewhat less examples of national supply reduction expenditure extensive analysis and an improved understanding studies are also provided. Finally, some conclusions of the individual elements involved are still possible, and recommendations are offered.

Introduction ► Page 9 Defining concepts

Public expenditure government documents or single budget lines; these are labelled expenditure. The required data The term «public expenditure» refers to the value of are instead embedded in budgets for larger sectors goods and services purchased by general govern- or programmes (unlabelled expenditure), which ments (at central, regional and local level) in order to means that modelling and calculations are needed. perform its functions. For instance, it refers to resources For instance, it is common that prisons do not have a spent on healthcare, justice, public order and safety, separate budget for drug-law offenders, because they education, social protection and so on (Eurostat, 2011), usually have one single budget for their entire activity. and its quantification is a costing exercise undertaken Therefore, the values of this embedded expenditure from the government’s perspective (EMCDDA, 2008). can only be estimated through modelling approaches The role of private expenditure in drug policy varies (EMCDDA, 2014). This requires skills, modelling tools across countries, timescales and policy areas. In many and techniques. countries, drug treatment is partly financed by the private sector (insurance companies, drug users or Despite the various factors which may challenge the their employers, relatives, etc.). In other drug policy robustness of estimation results (limited data availabil- areas, such as supply reduction, private funding usu- ity, layering of assumptions, changes in definitions or ally constitutes a negligible share of total spending regulations over time, etc.), the application of existing (European Commission, 2012). models can provide useful insights, as various countries’ experience shows (see the examples below). Drug-related public expenditure

Drug-related public expenditure is the sum spent by Public expenditure on supply governments on goods and services with the aim reduction initiatives of tackling the illegal drug phenomenon. Although drug policy expenditure estimates are deemed useful, In this report, public expenditure on drug supply most countries do not produce separate drug-related reduction comprises the funds spent by general gov- budgets as part of their ordinary budgeting exercise. ernment with the broad purpose of reducing the Relevant analyses and estimations can be complicated availability with the support of the police, law courts since several inter-ministerial and cross-governmental and prison services geared towards combating the sectors are involved in drug control programmes, illegal drug phenomenon, as defined by Eurostat including justice, policing and border control, prisons, (2011). In general, police services comprise, among social protection, education and health. Disentangling others, the regular and auxiliary policing of ports drug policy expenditure across government depart- and borders, coast guards and customs, as well as ments and inter-sectorial policies remains a significant road traffic regulations and supervision. The services challenge. Changes in legislation and the structure of provided by law courts comprise the operation or public administration can further hamper compara- support of civil and criminal law courts and judicial bility over time. systems, the prosecution service, fine enforcement An additional challenge lies in the fact that drug-re- and probation systems. Prison services comprise the lated programmes and activities can be found at many activities of prison administration and the operation or different levels of public administration. For instance, support of prisons and other places for the detention the funding for imprisoning drug-law offenders is usu- or rehabilitation of offenders, such as prison farms, ally provided by central government, while prevention workhouses, reformatories, borstals, forensic wards, of street dealing or social reintegration programmes etc. (Eurostat, 2011). for former drug dealers are frequently financed by In the case of public expenditure on drug supply local authorities. This makes it necessary to compile reduction initiatives, the vast majority of resources data at different administrative levels, which can be will be spent on enforcement targeting producers and a demanding task. dealers, but may also include legal action targeting In addition, often only a small fraction of drug-related users for drug possession when required by national public expenditure can be traced back directly to judicial systems.

► Page 10 Empirical estimates of demand and supply policy expenditure

ver the last decade at least 16 European coun- Interestingly, however, the information available sug- tries have provided comprehensive estimates gests that supply reduction activities accounted for O of drug-related public expenditure (EMCDDA, the largest share of drug-related public expenditure 2014b). Country estimates suggest that drug-related in most countries. Of the 16 countries which pro- expenditure ranged from 0.01% to 0.5% of gross duced complete estimates in the last decade, only domestic product (GDP). Since the studies may not four countries spent less than 50% of their total drug have applied the same expenditure classifications budget on supply reduction, while five countries spent or the same estimation methods, caution is required 70% or more. The other countries spent between when making cross-country comparisons (EMCDDA, 50% and 70% of their drug-related expenditure on 2014b). supply reduction.

Figure 1 Breakdown of drug-related expenditure between demand and supply reduction. Source: EMCDDA, 2014b

Analysis has also shown that funds allocated to classified under health and social protection, this drug-related initiatives account for only a small pro- may further suggest that European countries give portion of the overall public expenditure on the public higher political priority to supply reduction initiatives, order and safety sector. For instance, in 2008 (the only as part of public order and safety activities, than to year this exercise was systematically conducted in demand reduction initiatives as part of overall public European Union countries), supply reduction expendi- health activities (EMCDDA, 2008). Annually, EMCDDA ture represented between 2% and 12% of total public reports the most recent estimates available for national expenditure in this sector. This proportion compares drug-related public expenditure in percentage of to the proportion of drug-related spending on the the gross domestic product (GDP), in the European health and social protection sectors. The proportion Union countries, Norway and Turkey. When available, of drug-related expenditure on these items accounted EMCDDA reports also the proportion of funds spent for less than 1% of total public spending on health on supply reduction initiatives (http://www.emcdda. and social protection during that period. Since most europa.eu/countries). public spending on demand reduction initiatives is

► Page 11 Steps in cost estimation and analysis

larifying definitions, improving estimation services are not always obvious and easy to identify. methods, agreeing on best practices and find- For instance, when drug treatment services are pro- C ing reliable, standardised data will enhance the vided within prisons, the entity in charge has public utility of public expenditure estimates, as analysis order and safety as its first function but health as its over time and across policy areas and countries can “real” goal. Therefore, analysts must consider whether be improved(Single, 2009). Better quality data and to include the costs of these activities as supply reduc- further methodological developments are needed. To tion or demand reduction initiatives. Eurostat, along this end, we list below some recommended, general with most international organisations concerned with methodological steps in cost estimation and analysis. policy evaluation, includes the provision of services in the main function that the funds are used for, even Defining the scope and objects where the provider is less obvious. In this case, public expenditure on drug treatment provided in prisons Globally speaking, a first step for a viable estimate is should be excluded from expenditure estimates for defining the scope and type of public expenditure supply reduction services and accounted for as drug- considered. In addition, clear indications of the geo- related health expenditure. Sometimes, provision will graphical area and which function of public service be the responsibility of private entities while financing provision the estimates cover are needed. is a government responsibility. It should be noted, however, that the same service Making an inventory may have multiple policy purposes and double count- of service providers ing should be avoided. For instance, in the case of social reintegration programmes in deprived neigh- Secondly, it is necessary to identify the public entity bourhoods, financing may serve both the purpose or institutions responsible for the provision of drug- of preventing drug crime (and should be added to related services – in the case of this report supply supply reduction expenditure) and the purpose of reduction measures and interventions. The govern- preventing drug use (and should also be accounted ment authorities and public institutions and services for as health spending in demand reduction expendi- responsible for the implementation of the drug policy ture). For public accounting purposes the same funds initiatives, on the different competency levels, have should not be counted twice. Therefore, researchers to be made an inventory. will have to include this spending only once, choosing to record it under either preventive health or crime prevention. Sometimes, making a decision is difficult Mapping financing entities and the best way to deal with such situations is to guarantee that researchers document the different The third step is then to identify who finances these choices and assumptions they make. service providers. The starting point for a public expenditure analysis is accordingly the different public authorities which fund the respective aspects of the Data collection drug policy. Irrespective of the governmental struc- The fourth step is to determine a strategy for collecting ture, expenditure by all relevant national, regional the required data on public expenditure. In order to or local government institutions, directly or indi- obtain the relevant information, analysts will have to rectly associated with drug policy, should always be examine policy documents and accounting data. It is included. also recommended that interviews be conducted with Matching stakeholders responsible for providing drug the major stakeholders in the field, as a way to obtain policy services with their financing entities can be chal- better information about where financial data might lenging, as the entities in charge of providing public be available, and to search for international data sets.

► Page 12 Classifying and identifying data public expenditure spent with the main aim of tackling on drug-related spending the drug phenomenon. However, no systematic data collection has taken place. It is essential to classify public expenditure according to the purpose for which the expenditure is intended The research community has not formally adopted any (Reuter et al., 2004, and Eurostat, 2011), so the next of these classification systems. However, as Eurostat step to consider is how to group drug-related spending publishes data annually in accordance with the COFOG according to these sub-purposes. Taking into account classification, their system is frequently used. Eurostat the fact that drug-related expenditure on supply reduc- publishes data on public spending with the purpose tion initiatives comprises funds spent with the aim of of guaranteeing public order and safety, which is split combating the illegal drug phenomenon through the into the above-mentioned classes. Researchers still police, law courts and prison service, the classification have to opt for criteria and models to disentangle commonly used in international comparisons is the drug-related spending within these overall expen- Classification of the Functions of Government.1 diture classes. ►► The Classification of the Functions of In fact, supply reduction initiatives are often embedded Government (COFOG) provides a useful frame- in policy projects that have broader objectives and bud- work for classifying public spending according gets. Therefore, firstly, it is important to look beyond to its purpose. Under COFOG, most drug control expenditure that is exclusively used for drug policy policy expenditure is included in the “public and also include spending intended for broader policy order and safety” class of expenditure. The most domains that indirectly, but significantly, contribute to directly relevant subclasses are “police services”, drug policy or impact upon it. For instance, investing “law courts”, “prisons” and “R&D public order and in effective policing in certain problematic neighbour- safety” (Eurostat, 2011). hoods, in order to prevent all types of crime, may also contribute to preventing drug dealing. Consequently, ►► Reuter (2006) relates public expenditure to the it is relevant to take into account overall budgets for supply and demand sides of the market. He initiatives which may have direct synergies with drug counts public spending on supply reduction policy objectives. Secondly, modelling techniques are under “enforcement programmes” and con- required in order to disentangle drug-related expendi- siders that these are “programmes aimed at tures from overall expenditures. For instance, specific traffickers and producers to shift up the supply estimates and well-defined methodologies are needed curve for drugs; other things being equal, they to disentangle expenditure on drug-related crime from should raise the price of drugs and lower quantity. overall public spending on law courts (more details on Programmes aimed at users and retailers raise methodologies are given below). the transaction costs of buying drugs”. In other words, enforcement programmes will make In the event that not all the required data are available drug producing, trafficking or dealing more in international data sets, national databases should expensive, because they either bring about an be mapped. Every country has different structures increase in the unitary costs of production or for drug control services, provision and financing. introduce greater risk into the business (Costa National data mapping can be achieved in different Storti and De Grauwe, 2009). ways: information from registration systems, annual reports, interviews with key experts and/or contacts These two classification systems are substantially working in this field (De Ruyver et al., 2007). Detailed different. COFOG has been co-designed by the statis- mapping of available data can be demanding and tical office of the European Union and the European makes intensive use of resources. However, it is a Commission, with well-defined concepts and data fundamental step for any estimate of public spending collection methodologies. Annual mandatory data on drugs control. collection has been implemented in every European Union member state since early 2000. The system covers all functions provided and financed by govern- Extracting expenditure data ments. Drug-related activities are among the overall from sources: labelled and tasks provided and financed by the public sector, unlabelled expenditure but there are no specific methods specified or data collected on drug-related expenditure. Drug-related Some of the funds allocated by governments for expenditure is embedded in broader items, such as drug-related expenditure are identified as such in the public expenditure on public order and safety, security, budget (labelled expenditure). Often, however, the health, education or social protection. Conversely, majority of drug-related expenditure is not identified the Reuter’s classification was designed to organize (unlabelled expenditure) and must be estimated using modelling approaches. Total drug-related expenditure 1. National estimates sometimes use alternative definitions. is the sum of labelled and unlabelled drug-related See (Lievens et al., 2016) or (Kopp, 2006) for further details. expenditures (EMCDDA, 2016).

Steps in cost estimation and analysis ► Page 13 Since labelled expenditures are clearly identified in For instance, the number of drug-law offenders in budgets, calculation methods are not required. Time prison may allow estimating the proportion that con- series data are often available for labelled expenditure. victed prisoners for drug-law offences represent from The biggest challenge when data on labelled expen- total prison population, and therefore to approach the diture are compiled is to ensure complete mapping proportion that drug-related expenditure on prisons of all entities in charge of providing these services, as represents from total prison spending; or the propor- they can be spread across different government levels. tion that drug-related cases handled by the police, Depending on the national structures, expenditures by prosecutors or by drug-law courts on the total from all relevant national, regional or local government number of cases handled by these institutions may institutions that are directly or indirectly associated allow starting approaching their drug-related costs. with drug policy should always be included. To design attributable fractions, models use the sup- For unlabelled expenditure, a modelling procedure port of data on crime, police, law courts or prisons is necessary to estimate these different expenditures activity. Appendix 3 presents information and data and the modelling is based on either a top-down or by groups of variables. These groups encompass total a bottom-up approach. Frequently, these estimates public expenditure, drug-related public expendi- require the use of activity data to develop estimates ture, supply reduction public expenditure; drug law (for example, number of offences, offenders, criminal offences; crime reported by the police, drug-related cases, prisoners, etc.) crime, conviction statistics and prison population. Within groups, variables directly relevant are listed. Modelling unlabelled expenditure For each variable, data available are listed by source, country and time period. Finally, this annex reports The top-down modelling approach is mainly used when the number of observations available for each vari- the data available are embedded in programmes with able. The relevant sources include data from the broader goals and the fraction attributable to drugs can Council of Europe, EMCDDA, EUROSTAT, Univeristeé be identified as the proportion of the overall budget. de Criminoligie et de Droit Penal de Lausanne and In order to identify this proportion, models lay down the UNODC. objective criteria and calculate attributable fractions. Despite that data available are still referent to a short Unlabelled drug-related expenditure = Overall expenditure × Attributable fraction period of time and that data are still missing in many countries/years, gathering available information shall There is no general methodology to determine attrib- allow developing better methods and more accurate utable fractions also known as repartition keys. In estimates in the future. practice, the appropriate repartition key is determined by the object of the estimate, data availability and the When international sources are not available, publicly modelling approaches available. Repartition keys are available national statistics and data from competent determined in different ways on the basis of informa- public bodies should be used. tion from activity data, extracted from registration Advantages of the top-down approach systems, annual reports and/or contacts working in this field (De Ruyver et al., 2007). When determining ►► Availability of data: the availability of aggre- attributable fractions, the data used should prefer- gated budgetary data means that top-down ably be publicly available or, even better, be stored approaches can be easily applied. within international databases. This can guarantee ►► Low cost: the availability of aggregate cost data the possibility of producing similar estimates in the means that the time and costs required to esti- years that follow and in other countries. mate a top-down unit cost can be reduced. Appendix 3 summarizes the information and data ►► Versatility: the methodology enables an analyst available in the most relevant international data- to forecast how costs may change as a result bases that can be used to estimate unlabelled public of a reduction/an increase in service usage expenditure on supply reduction. It describes the (for instance, when there are less/more drug- activity data reported, the reporting countries and related crimes committed in a certain year than time periods. expected) and how these costs change over time. This Appendix reports the data available concerning the annual statistics on national public expen- There are, however, some limitations associated with a diture on police, law courts and prisons reported by top-down approach. Firstly, it does not clearly identify Eurostat. These data include not only expenditure on the different factors that may drive the costs and there- drug-related initiatives, but the total spent to tackle all fore often masks the underlying factors that determine types of crime. Therefore, to disentangle drug-related why unit costs vary within a single, yet heterogeneous, expenditure and built attributable fractions, activity services group. The criteria laid down for estimating data shall be required. attributable fractions do not always take into account

Page 14 ► Public expenditure on supply reduction policies all of the characteristics that may impact the total costs, ►► Versatility: the methodology enables an analyst which means that cost functions are often simplified. to forecast how costs may change as a result of These estimates are therefore often not very precise. a reduction in service usage or demand. Nevertheless, they are frequently used and provide valuable proxy indicators for average costs. However, the main disadvantage associated with the bottom-up approach is that it requires detailed infor- An alternative method of estimating drug-related mation concerning both the type of costs associated expenditure is to base estimates on the cost of provid- with the provision of each service (full knowledge of ing one unit of public service, known as the bottom- the production function of each public service) and up modelling approach. This modelling approach the unit cost of each of the production factors. starts by detailing how much it costs to provide one unit of service or intervention. For instance, how A combination of the two approaches may be pre- much does it cost to keep one drug-law offender in ferred. The advantage of this dual method is that prison? Considering the different costs borne by the it makes cross-verification possible; the data gath- government for managing a prison facility, such as ered on the basis of the top-down approach can be the real costs of state property, prison staff, electric- double-checked and supplemented with the data ity, water and gas, machinery, etc., it is possible to retrieved from project actors in the field. estimate how much each detainee costs per day. This sum can then be multiplied by the number of drug- related detainees, taking into account the different Reporting the value of estimates costs associated with each type of detainee, based on the different lengths of prison sentences, different The basic format used to report the value of estimates security levels, etc. To obtain the total expenditure on is monetary value in nominal terms. However, to per- drug control policy, all the cost elements should be mit comparability over time, if reported in monetary identified and totalised. units estimates should be adjusted for inflation.

The bottom-up approach is particularly appealing In addition, some authors report the value as a per- when relevant unit costs are readily available. If, on centage of GDP. This way of presenting the results the other hand, every type and element of the drug considers the economic dimension of a country. It is policy has to be separately estimated, the approach likely that drug-related spending is higher in a country can be demanding and challenging. with 85 million inhabitants than in a country with Advantages of using a bottom-up approach 10 million inhabitants. The same holds for a higher income country (EMCDDA, 2008). For these reasons, ►► Transparency: detailed cost data allow potential errors to be investigated and their impact tested reporting the value of estimates as a percentage – this facilitates a quality assurance process. of GDP is a valid choice, since it takes account of both the inflation problem and the size and level of ►► Simplicity: the calculation required to estimate a country’s income. unit costs is easy to understand and direct, providing a simple way to quantify the admin- Another frequently used approach is reporting the istrative and overhead costs associated with a value of spending per number of problem drug users. range of public services. In this case, authors take into account the dimension ►► Detail: detailed cost data can highlight vari- of the drug problem. Reporting all these complemen- ations, enable analysts to explore the factors tary measurements of drug-related public spending underlying variations and determine whether, facilitates the validation of the data through cross-ver- for example, some service users account for a ification and increases the economic significance and disproportionate share of the costs. utility of the estimates.

Steps in cost estimation and analysis ► Page 15 Examples of sectorial models

n addition to collecting labelled public expenditure trafficking and dealing in illicit drugs; and driving data, several examples exist of models applied to under the influence of drugs and alcohol. The pro- I identify unlabelled expenditure on drug control in portion that this time represented of the total work- the national contexts. Different authors have applied ing time for the police forces was then used as an different definitions, data sets and models to estimate «attributable fraction» for disentangling the amount of items of drug-related expenditure. In this section, money that was spent on drug-related police activities examples of the definitions, data and models are from the total spending on police activity. Within the provided. The section aims to present the models funds allocated for supply reduction, 14% was spent utilised to estimate unlabelled drug-related spending on drug-police activity, while law courts and prisons on various types of supply control initiatives. absorbed the remaining 21% and 65% respectively. Moolenaar (2009) developed a model and provided an Police example of how to estimate public spending on supply reduction initiatives in the Netherlands. The author Public spending on drug-related police services is applied a top-down model based on the average cost probably best identified using a top-down approach.2 of police time spent on this work. Moolenaar calcu- In order to disentangle this expenditure from total lated the average duration of each type of criminal public expenditure on public order and safety, as investigation firstly by type of criminal activity (assum- published by Eurostat, attributable fractions has been ing that different criminal activities have different calculated with the help of activity data. Authors investigation costs – based on an assessment of the have used auxiliary data to create these fractions, for severity of the crime) and secondly by the number of instance data on drug-related offences in proportion cases registered for each criminal activity. to the total number of offences. The following are concrete examples of variables available in national Customs and international data sets, which have all been used separately to estimate attributable fractions: With regard to customs services, the share of customs (1) The number of drug-related crimes per 100 000 officers who deal with drug control activities and/or population. the proportion of their working time compared to the total number of custom officers has been used (2) The number of drug-related cases reported as an attributable fraction. As input data, the number by the police out of the total number of police of customs officers who are involved in drug control cases. activities forms the basis for the calculation. These (3) The time the police forces spend on combating estimates are then applied to the total expenses of the the drug phenomenon in proportion to their customs administration (minus any labelled expen- total working time. diture specifically targeted towards this activity). It should, however, be noted that most customs officers To estimate the share of costs attributable to spend- do not exclusively devote their working time to drug ing on police action against illicit drugs, the ratio is control activities, so, ideally, the percentage, or the multiplied by the total expenditure of the law enforce- average, of working time devoted to drug control ment agencies and reduced by any available data on should be estimated. labelled expenditure for drug control. Kopp and Fenoglio (2002) estimated the drug-related A concrete example is provided by the estimates for expenditure of customs services based on the propor- Italy. Genetti (2014) estimated drug-related public tion of customs officers allocated to combating illicit expenditure for police forces based on the amount drug trafficking within the total number of customs of time that staff spent on drug control in 2011: pos- officers. This proportion constituted the attributable session of illicit drugs for personal use; production, fraction applied to the total customs budget. The authors concluded that, in 2000, drug-related spend- 2. Although it is also possible to use a bottom-up approach, ing on customs services represented approximately since police activity is normally financed by the central government budget, a pragmatic approach frequently used 10% of total drug-related spending in France. As these is to prepare estimates based on these aggregated budgets. authors pointed out, omitting costs such as those of In this case, estimates for public spending are relatively detection equipment or detection dogs may consti- complete, considering all relevant costs. Additionally, this tute a relevant limitation, since the costs of detection method facilitates the international comparability of results, since comparable data are available for most European equipment may have a strong impact on relatively countries. small budgets such as that for customs.

► Page 16 Lievens et al. (2016) estimated drug-related expendi- supreme court) was estimated based on a bottom-up ture by customs based on the proportion that drug- approach, which combined the number of cases and law violations represented in the total number of the average cost per case (Ramstedt, 2006). The data violations registered by the ordinary customs services, were obtained from a judicial system official. It should investigation services and motorised brigades. They be noted that the average case cost was not recorded used a top-down approach based on the number of by type of crime, instead the average for all types drug-law offences in proportion to the total number of crime was used as an indicator for drug crimes. of offences. In 2012, customs spending represented Moreover, for the court of appeal and supreme court, 3.6% of the total drug-related public spending on only the total number of criminal cases was available supply reduction in Belgium. and the fraction of drug cases was estimated based on the situation in the district courts (9%). Regarding Court systems the range of the estimates it should be noted that the author included, as an upper limit for estimates, Spending on drug-related court services has been a specific percentage (30%) of the costs of tackling extracted from total national expenditure on law other crimes, as they may have been committed under courts based on the following activity data: the influence of drugs. (1) The proportion of drug-related offences with regard to the total number of offences. Prisons (2) The proportion of drug-related convictions with regard to the total number of convictions; Unlabelled costs of drug-law offenders in the prison (3) The proportion of people imprisoned for system can be estimated using the number of con- drug-related offences with regard to the total victed prisoners for drug-related offences expressed number of prisoners. as a proportion of the number of overall convictions. For example, to estimate expenditure related to drug- Kopp and Fenoglio (2002) estimated the expenditure law offences in prisons, two elements have been taken that drug-related crime represented in the French into account: overall prison expenditure for a given judicial system. They adopted a bottom-up approach, fiscal year and the attributable fraction of prisoners taking estimates of the time spent by the various convicted of drug-law offences. types of French judges and other types of administrative staff on drug-law cases and then multiplying EMCDDA (2014) provides an example of how public these estimates by their average salaries. Based on expenditure on drug-law offenders in prisons can be this method, the authors concluded that law courts estimated. Based on data for public expenditure on represented about 24.4% of total drug-related public prisons provided by Eurostat and data on the number expenditure in France in 2000. of offenders provided by the Council of Europe, the proportion of prisoners sentenced for a drug-law In Croatia, drug-related spending on the courts offence as their main offence was applied to the total covered drug-related cases prosecuted by both the public expenditure on prisons. A range of estimates State and the courts (Budak et al., 2013). A top-down was calculated, with low estimates taking into con- approach was used based on estimates of the num- sideration only prisoners sentenced for a drug-law ber of drug-related crimes as a proportion of the offence and high estimates also including pre-trial total number of crimes registered by the police. The prisoners. Between 2000 and 2010, this expenditure researchers recognised that these estimates were was estimated to range, on average, between 0.03% to crude, but they could not obtain a better proxy for 0.05% of GDP in 22 European countries. On applying this particular component of the estimates. these percentages to the entire EU for the year 2010, In Sweden, expenditure on drug-related prosecutions the estimated expenditure was within the range of and court cases (district court, court of appeal and 3.7 billion euros to 5.9 billion euros.

Examples of sectorial models ► Page 17 Examples of national studies

everal models and data sources have been 2008 (Vander Laenen, De Ruyver, Caulkins & Lievens, applied in different national contexts to identify 2012). It further developed upon two earlier stud- S labelled and unlabelled expenditure allocated to ies (De Ruyver et al. 2004, 2007) by carrying out a drug control initiatives. Due to national specificities, new and more refined estimation of public expendi- neither their external validity nor the comparability ture to combat illegal drugs. The study combined a of the methods used have been tested. The extent top-down and a bottom-up approach for estimating and specificity of labelled drug-related expenditure public expenditure. The vast majority (98.45%) of vary substantially across countries, as do the data and the expenditures were identified as a result of the methods applied for estimating unlabelled expen- top-down approach. Public expenditures identified diture. The national estimates presented below are through the bottom-up approach (1.55%) concerned therefore not directly comparable. They nonetheless organisations that depended on the government for provide examples of useful models and estimates and most of their funding. illustrate some of the approaches applied. The total drug-related expenditure was broken down Croatia by programme: law enforcement, treatment, prevention, harm reduction and other. For 2008, public Budak et al. (2013) aimed to identify the central gov- expenditure on law enforcement constituted 45% of ernment’s total drug-related public expenditure and the total expenditure. This was slightly less than the to develop a method of estimating and allocating spending on treatment (49%) and substantially more unlabelled expenditure by type of drug policy pro- than that on prevention (4%), harm reduction (0.8%) gramme (prevention, treatment, social reintegration, and other (1.2%). When estimated in the same way in harm reduction and law enforcement). For labelled 2004 and 2008, public expenditure on law enforce- expenditure, governmental institutions were asked ment showed a substantial increase, both nominally to classify budget expenditure by public function (from 186 038 337 euros to 243 000 490 euros) and and by type of programme. Unlabelled expenditures in relation to the other programmes (it increased by were identified indirectly with a system of reparti- 6 percentage points). tion keys, which were applied to the total state unit budget (minus labelled costs). The repartition keys were estimated using supply reduction activity data. Italy Unlabelled public expenditures were estimated on the assumption that they make up the part of public For the purpose of estimating drug-related public expenditure remaining after labelled public expendi- expenditure in Italy (Reitox Italian Focal Point, 2014), a tures for combating drug abuse have been deducted model was developed to analyse the flow of cost infor- from the total expenditure of a public body. mation from various sources. The model consisted of For the period 2009-2012 the study suggested that four components: private or indirect costs (individual public expenditure on law enforcement constituted costs and costs due to loss of productive capacity) and about 73% of total drug-related public expenditure by public expenditure or direct costs (law enforcement central government, whereas prevention, treatment, costs, social and health costs). To determine the costs social reintegration and harm reduction represented of law enforcement, different sources of information 12%, 13%, 0.3% and 2%, respectively. When comparing were used: data concerning traffic control and traffic unlabelled expenditure for the different programmes accidents; police data on people caught with drugs in a single year (2011), unlabelled expenditure on law for personal use; data on the number of convictions enforcement represented 82% of total unlabelled for drug trafficking; and data on crimes related to drug-related expenditure. On the other hand, law drug trafficking. enforcement accounted for 4% of the total labelled expenditure. Overall, the estimates indicated that For 2011, the cost of drug-related law enforcement drug-related expenditure stood at 0.2 % of the GDP. was estimated at 1 600 435 296.60 euros, or roughly 40 euros per inhabitant aged 15-64 years. The largest Belgium cost component was prisons and alternative measures (65%), whereas trials and legal expenses, law enforce- The study Drugs in Figures III measured how much ment activities and administration represented 21.3%, the Belgian Government spent on drug policy in 13% and 0.7%, respectively.

► Page 18 France costs due to loss of productivity) and public spending, including direct spending on supply reduction In a French study the method relied on analysing services. These were disaggregated into spending activity records, wherever available in the agencies on law enforcement and on criminal justice, which concerned (Kopp, 2015). The total expenditure for drug- included factors such as law enforcement agencies related activities was then aggregated. The top-down and the federal drug control service. approach applied in this case provided an indication of Public expenditure on supply reduction services was the proportion of expenditure for drug control related estimated using a top-down approach and various activities compared to the overall expenditure of all sources of information: police data on persons caught the institutions and agencies concerned. To obtain an with drugs for personal use; data on the number of estimate, a fraction was applied to the total staff and sentences for drug trafficking; and data on crimes routine operating costs of the agency concerned. In the related to drug trafficking. As there was no pub- year 2010, for example, 10% of police activities were lished information on the fraction attributable to attributable to drug control activities, which involved drug-related crime in Russia, the fraction estimated 60 police units. In this example, police expenditures in a study by the US Office of National Drug Control attributable to drug-related activities were calculated (22%) was employed with a view to estimating the by multiplying the total expenditure of the police law enforcement and judicial system expenditures. services by this fraction of 10%. A bottom-up approach was also adopted, based on the working time of staff performing support functions in Portugal connection with drug-related activities or the equip- There are few examples of attempts to estimate ment used, as recorded by the agencies concerned. the impact of changes in the legal system on drug- For example, the time spent giving prevention talks related public expenditure and drug-related bud- in schools and the time spent by the police forces on gets. Gonçalves et al. (2015) are an exception as they alcohol tests were included in the calculations. conducted a comprehensive social cost analysis of the situation before and after decriminalisation in Luxembourg Portugal. The authors found a significant reduction in the non-health related costs of drug policy between Since 1999, the social costs of drugs have been esti- 2000 and 2004, in particular in the legal system (direct) mated annually in Luxembourg. These estimates take costs. Although these observations highlight signifi- account of the total costs to public and private agents cant changes, prudence is still called for in concluding of the consequences of drug use and trafficking. Public causal relationships with the new Portuguese National spending is analysed in five sectors: prevention, treat- Strategy for the Fight against Drugs (NSFAD). ment, harm reduction, law enforcement and research. In the law enforcement field, as in other fields, the analysts face the twofold challenge of accounting Other national studies for drug-related spending, as financed by different general government levels, and of developing models There are other examples of public expenditure studies to extract unlabelled drug-related expenditure from additional to those mentioned above. For instance, broader budgets (Origer, 2002). Mostardt et al. (2010) estimated public expenditure in 2006 for Germany using data from Eurostat and Law enforcement was estimated to account for 39% the COFOG system, concluding that supply reduction of total drug-related public expenditure in 1999; pre- represented close to 65% of the total drug-related vention, treatment and harm reduction expenditure public spending; Rigter (2006) estimated that 75% of amounted to 59%, whereas research and other stood public expenditure was spent on law enforcement in at 2%. Overall, drug-related public expenditure rep- the Netherlands; Ramstedt (2006) presented public resented 0.013% of GDP. expenditure estimates for Sweden, whereas public spending on supply reduction represented between Russia 70 to 76% of the total; and Lievens et al. (2016) published a social cost study, including estimates of public For Russia, public expenditures on law enforcement expenditure to deal with legal and illegal drugs in agencies and on the judicial system were estimated as Belgium. There are also US (ONDCP, 1989-2015) and part of a social study (Potapchik and Popovich, 2014). Australian (Moore, 2008) estimates. Despite substantial The comprehensive model encompassed private and differences, the studies may all be viewed as necessary indirect costs (the cost for the individual and the first steps in national drug policy evaluations.

Examples of national studies ► Page 19 International databases used to model drug-related public expenditure

he only available international compilation Appendix 1 provides a list of relevant data sources. of updated estimates of drug-related public In addition to the two data sources already men- expenditure on supply reduction is published tioned, there is information on international reporting T 3 by the EMCDDA for the EU member states , report- concerning supply reduction factors such as: drug ing the available national estimates of total drug-re- related crime (EMCDDA and the European Institute lated spending and spending separated into sup- for Crime Prevention and Control); prison activity ply and demand reduction initiatives. The scope for and costs (the Council of Europe);crime and criminal cross-country comparisons is nonetheless limited justice systems (Eurostat and the European Institute because the estimates often do not use comparable for Crime Prevention and Control). Appendix 3 makes definitions, data sets or methodologies. an extensive description of data published by international institutions. Another database of particular relevance is Eurostat. This is partly because it is based on a consistent cat- egorisation system and on internationally agreed definitions, which are required features for international comparison. The Classification of the Functions of Government (COFOG) is a detailed classification system for the functions or socioeconomic objectives that general government units aim to achieve through a range of outlays. Eurostat has published annual data according to the COFOG classification for European countries since the early 1990s. This data source has proved to be relevant and amenable to a wide variety of analytic applications. However, the data set does not comprise data concerning specific spending on drug-related public initiatives. In order to disentangle drug-related expenditure from the broad classes of public spending, modelling approaches are adopted according to the sector of intervention.

3. See http://www.emcdda.europa.eu/topics/ drug-related-public-expenditure.

► Page 20 Conclusions

►► Every European country allocates significant ►► The total budget for supply reduction services public resources to the drug policy field. Public is the sum of labelled and unlabelled expendi- expenditure studies can reveal how much public tures. Labelled expenditures are clearly iden- authorities are spending on drug policy and for tified in public budgets, whereas a modelling what purposes such expenditure is incurred. procedure is required for estimating unlabelled ones. The modelling is based on either a top- Public expenditure estimates can be used as a ►► down or a bottom-up approach. Using both tool for assessing whether policy intentions are approaches as complementary is advantageous actually reflected in action, and they constitute but expensive. A list of advantages and lim- a necessary tool for implementing thorough itations for both alternatives is provided, in policy evaluations. Public expenditure studies addition to empirical expenditure studies for should mirror all relevant activities and policy supply reduction activities in some European approaches and may be particularly appropriate countries. in times of austerity.

►► Estimates exist for 16 EU countries, out of the While recognising the limitations imposed by 30 potential reporting countries (EMCDDA, ►► the data sets currently available, this report 2014b). Estimates suggested that drug-related provides examples of current practice and, in so expenditure ranged from 0.01 % to 0.5 % of GDP. doing, suggests areas of future focus for desired 12 out of the 16 reporting countries allocate the methodological development. It is hoped that largest share of drug-related public expenditure the estimation of drug-related public expendi- for supply reduction. ture on supply reduction initiatives and policy ►► Data availability is one of the main limitations in evaluation will move forward in Europe. For this field. The use of international databases is continued improvements to take place, how- recommended, whenever possible. These data ever, it is essential that a network of experts is sets employ broadly accepted concepts and developed and maintained. Partnerships should definitions providing better comparable data. be extended and maintained with the goal Sometimes, however, national data sets can con- of developing good practices, standards and tain more detailed or reliable information. guidelines in this field.

► Page 21 Recommendations

1. Improving estimation methods with further meth- 5. A methodology using a set of repartition keys odological developments; agreeing on best prac- according to COFOG categories can be a starting tices and; finding reliable standardised data will point in order to estimate unlabelled drug-related enhance the utility of public expenditure estimates, expenditures. General agreement among all par- as that will permit analysis over time and across ticipating countries on definitions and methods policy areas and countries. will help to improve the comparability of results between countries. 2. Improved data quality and developing relevant data sources is needed for conducting more precise 6. Public expenditure studies involve analytical work, estimations of spending on drug control measures which requires adequate human and technical and to measure the impact of drug control policies. capacities in all relevant stakeholder fields. This is One option is to develop guidelines for data col- important for obtaining the data quality needed lection and economic modelling of evaluations. for aggregation and comparison. To achieve this, a network of experts could be established and a 3. It is essential to classify public expenditure based on working group of experts developed. the purpose for which the expenditure is intended. It is therefore useful to use a consistent categorisa- 7. Developing methods to estimate public expendi- tion system, such as the international Classification ture on supply reduction requires effective work- of the Functions of Government (COFOG). ing partnerships between drug policymakers and specialists in the police, law courts and prisons. 4. Cross-country comparisons are important, but Collaboration with public accountancy experts and they are only possible with a common methodol- those in charge of economic modelling is required ogy of public expenditure estimates. International to guarantee meaningful estimates. data sets and modelling techniques need to be expanded and improved in order to increase the capacity to carry evidence based on drug policy evaluations in the drug field.

► Page 22 Glossary

Attributable fractions also known as repartition Cost-benefit analysis converts all types of outcomes keys are coefficients estimated to help those who to a monetary equivalent, in contrast to cost-effective- estimate drug-related expenditure with the purpose ness analysis (Chalk et al., 2013 and Drummond et al., of reflecting the proportion of expenditure allocated 1997). As a result, the euro value of the intervention’s to finance drug-related initiatives. Therefore, attrib- benefits can be directly compared with the euro value utable fractions are designed to accurately isolate of the intervention’s costs. Two common methods drug-spending, when drug-related expenditure is for comparing benefits and costs include calculating embedded into a broader budgetary structure. There net benefits (costs are subtracted from benefits) and is no general methodology to determine repartition benefit-cost ratios (benefits are expressed as a percent- keys. It depends on the case (on the basis of the activ- age of programme costs). A related type of analysis is ity information and data available) (Vander Laenen the cost-offset analysis in which future costs or cost- et al, 2011). savings are examined. Since cost-benefit analyses combine multiple outcomes into a single measure Cost analysis provides monetary estimates of the and allow direct comparison of costs to benefits, they costs of a particular intervention or set of interven- often provide clearer guidance than cost-effectiveness tions, and also information on the amount of resources analyses on which treatment programmes should be (e.g. labour, facility, supplies) used in their provision. adopted – namely those programmes whose ben- The latter information is often used to identify critical efits exceed their costs. Cost-effectiveness analyses cost components of the intervention and to assess can provide a ranking of competing alternatives but whether the costs are affected by changes in key not information on the extrinsic value of any single assumptions (Bray and Zarkin, 2006). In addition intervention independent of the alternatives (Bray to being the first step in a cost-effectiveness and and Zarkin, 2006). cost-benefit analysis, cost studies can also be used to compare the relative costs of one intervention to General government comprises the central govern- another or to monetise savings from implementing ment, state government (in some countries it applies a particular action (Chalk et al., 2013). to the federal level of government), local and social Cost-effectiveness analysis involves estimating security funds (Eurostat, 2011). the ratio of the difference in costs between two alternatives (net costs) divided by the difference in Government expenditure is defined as a particular the outcomes (net effectiveness) (Gold et al., 1996). set of transactions, comprising the expending under- Traditionally, this measure has been used in health taken by general government sector units (Eurostat, economics. However, this evaluation tool can be used 2011). in any framework of policy intervention, given that the outcome measures are those relevant for each type Economic evaluation is a comparative analysis of of public policy analysed. It is, essentially, the incre- alternative actions in terms of both their costs and mental price of obtaining a unit outcome effect (e.g. consequences (Drummond et al., 1997). a 10% reduction in the number of drug-law offences in the past month) from a given police intervention Labelled drug-related expenditure is the ex-ante (e.g. introducing drug squads in problem neighbour- planned public expenditure made by general gov- hoods) when compared to an alternative (e.g. regular ernment in the budget that reflects the public and policing). Intervention costs are estimated in monetary voluntary commitment of a country in the field of units, such as the euro. The effect of the intervention drugs. In addition, it is any expenditure identified can be any policy-relevant outcome that is collected as drug-related in public accountancy documents for all interventions under consideration. (EMCDDA, 2008).

► Page 23 Public expenditure is the value of goods and services costs caused by the consequences of drug use, which purchased by the general government of a state in can affect anyone in society, including those who order to perform each of its functions. The functions do not necessarily use drugs or are involved in drug of governments are, among others, the provision of demand, supply or drug policy. For instance, external health care, justice, public order, education and social costs are the expenditure on drug-related nuisance, protection. Public expenditure studies are important expenditure on tackling offences committed under the because they provide information about the size and influence of drugs, losses of productivity or absentee- the composition of the costs of public programmes ism associated with either drug trafficking or dealing and interventions (Eurostat, 2011). activities, among others (Single et al., 2003). Total drug-related public expenditure is the sum of Social costs of illegal drugs comprise all costs carried the labelled and unlabelled drug-related expenditure by the different sectors of society as a consequence (EMCDDA, 2008). of the illicit drug phenomenon. Public expenditure is only one of the cost elements here. Social cost is Unlabelled drug-related expenditure is the non- the sum of public expenditure, private expenditure planned or non-publicly announced ex-post public and external costs. Private expenditure constitutes, expenditure incurred by the general government in for instance, the money spent by private citizens to tackling drugs that is not identified as drug-related purchase illicit drugs. External costs comprise the in the budget (EMCDDA, 2008).

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Page 26 ► Public expenditure on supply reduction policies Appendix 1 – Available databases and potential indicators for drug- related public expenditures

Examples of international databases, which can be used for estimating drug-related public expenditures

Level of Examples of databases Estimation data estimation International EMCDDA Statistical –– The EMCDDA statistical bulletin covers a broad range of bulletin areas including the most recent estimates of drug-related and crime in the form of drug seizures, types of offence, price, purity and use in prison, and country responses to the Public expenditure drug situation in Europe. http://www.emcdda.europa.eu/ database data/stats2015 –– The EMCDDA also publishes the most recent national data on drug-related public expenditures available in Europe. –– http://www.emcdda.europa.eu/topics/ drug-related-public-expenditure WHO Database –– Global Information System on Resources for the Prevention and Treatment of Substance Use Disorders (includes information about: prevalence and burden of Disease, monitoring and surveillance; policy; treatment system and services; pharmacological treatment; prevention programmes for substance use and related harm; and human resources and civil society involvement). Eurostat Public expenditure according to the Classification of the Functions of Government (COFOG) COFOG published data according to two levels of classification (United Nations, 2008). The first classifies expenditure into 10 general functions, one of which is “Public order and safety”. The second classifies expenditure into 69 groups, in which there are three indicators of interest: police service, law courts and prisons. The definitions below are provided by the UNODC. From the Public order and safety section: Police services –– Administration of police affairs and services, including alien registration, issuing work and travel documents to immi- grants, maintenance of arrest records and statistics related to police work, road traffic regulation and control, prevention of smuggling and control of offshore and ocean fishing. –– Operation of regular and auxiliary police forces, of port, border and coast guards, and of other special police forces maintained by public authorities; operation of police labora- tories; operation or support of police training programmes.

► Page 27 Level of Examples of databases Estimation data estimation Law Courts –– Administration, operation or support of civil and criminal law courts and the judicial system, including enforcement of fines and legal settlements imposed by the courts and operation of parole and probation systems. –– Legal representation and advice on behalf of the government or on behalf of others provided by government, in cash or in services. Prisons –– Administration, operation or support of prisons and other places for the detention or rehabilitation of criminals such as prison farms, workhouses, reformatories, asylums for the criminally insane, etc. UN-CTS (Crime and Data produced by UNODC have multiple sources. Mem- Criminal Justice ber States regularly submit to UNODC statistics on drugs Statistics) (through the Annual Report Questionnaire) and crime and criminal justice (through the annual Surveys on Crime Trends and Operations of Criminal Justice Systems). Other data are collected through national surveys implemented by UNODC in co-operation with national governments or are compiled from scientific literature. UNODC attempts to maximise the comparability of the data and estimate regional and global statistics. SPACE SPACE unites two related projects: SPACE I provides data on penal institutions and the population held in custody, as well as on certain conditions of detention, while SPACE II collects information on persons serving non-custodial sanctions and alternative measures. Data are collected every two years by means of two question- naires sent to the equivalents of the ministries of justice, the penitentiary administrations and the probation authorities of each country in Europe. The collection and validation of these data then takes place at the University of Lausanne, where analyses and interpretations for both projects are formulated through a common methodology. This methodology aims to allow comparisons among states at European level, by proposing SPACE categories instead of each country’s own national categories, while still including questions regarding the particularities of their specific sanctions and measures. The SPACE project produces two annual reports: SPACE I – Prison Populations and SPACE II – Persons Serving Non-Custodial Sanctions and Measures, presenting the data collected and the key points of the results.

Page 28 ► Public expenditure on supply reduction policies Level of Examples of databases Estimation data estimation European Sourcebook The Sourcebook contains data from 41 European countries on Crime and Criminal regarding their criminal justice systems. The book is structured Justice Statistics into six main chapters covering different stages of the judicial system: Police Statistics, Prosecution Statistics, Conviction Statistics, Prison Statistics, Probation Statistics and, for the 2014 edition, a final chapter on National Victimization Surveys. The data provided are systematically accompanied by texts and notes relating to the specificity of each country and which discuss the different challenges attributed to the comparison of the data. Social Expenditure The OECD Social Expenditure Database (SOCX) provides a Database unique tool for monitoring trends in aggregate social expenditure and analysing changes in its composition. The main social policy areas are as follows: old age, survivors, incapacity-related benefits, health, family, active labour market programmes, unemployment, housing, and other social policy areas. ESPAD Drug abuse prevalence among teenagers in European countries. National Database of national Expenditures of different groups, in which can be found some statistics indicators of interest: police service, law courts, prisons, medical and social services. Annual report from Data on Social Services Department expenditures at regional Social Services level and the number of drug users receiving social benefits Department in connection with drug use.

Appendix 1 – Available databases and potential indicators for drug-related public expenditures ► Page 29 Appendix 2 – The international Classification of the Functions of Government (COFOG)

he COFOG classification has three structural (non-investment) transfers. Eurostat has published levels. At the first level, government expenditure annual data according to the COFOG definitions for T is broken down into 10 functions. These are then the European Union countries since the early 2000s. divided into 69 groups (second level of COFOG), which The extensive structure of COFOG contrasts with the are themselves divided into classes at the third level – four-category division introduced by Reuter (2006), the most detailed classification level. COFOG permits based on the likely effects of services provided by an examination over time of trends in government drug policy programmes (namely prevention, treat- outlays on particular functions (Eurostat, 2011). ment, enforcement and harm reduction). Reuter’s programme division is the classification of the recip- The detailed three-level structure of COFOG includes ients (NPOs) with drug-policy programmes. financial flows of public finance, which are going from An example of an overview of public expenditure state and local (regional and municipal) budgets to groups, broken down according to the main public non-profit organisations (NPOs) with drug-policy functions pursuant to the international classification programmes. COFOG is a functional classification of the functions of the government at the third level, system used by the System of National Accounts is shown in the table below. 1993. COFOG is a useful international classification system for spatial comparison (between countries) A pragmatic approach towards drug-related research and also for time comparison (over time). In principle, and public expenditure estimates would suggest its units of classification are individual transactions. adopting a classification such as COFOG, as proposed This means that each outlay (purchase or transfer) by Eurostat. The COFOG classification system guar- should be assigned a COFOG code according to the antees annually available data for most European function that the transaction serves. This principle is countries, according to harmonised definitions and valid for both capital transfers (investment) and current standard data collection procedures.

Public expenditures according to the classification of public functions

Public functions Public functions at the third level of classification 01 General public services 014 Basic research 03 Public order and safety 031 Police services 033 Law courts 034 Prisons 07 Health 071 Medical products, appliances and equipment 072 Outpatient services 073 Hospital services 074 Public health services 075 R&D health 09 Education 091 Pre-primary and primary education 092 Secondary education 094 Tertiary education 095 Education non-definable by level 096 Subsidiary services to education 10 Social protection 105 Unemployment 106 Housing 107 Social exclusion

► Page 30 Appendix 3 – Summary tables: data from international databases

Table 1 - Public expenditure

Data and Dataset Type of DATABASE YEARS Number of Statistics information observations(*) Law Courts Eurostat, Europe (31) = 473/651 Expenditure Public of the European Police Services 1995-2015 Europe (31) = 473/651 expenditure general Union government Prisons Europe (31) = 473/651 (EU) Total drug- related public expenditure Drug- Public Percentage Country Drug related expenditure Last year spent on supply Profiles, EU (30) =20/30 public on supply available reduction expenditure reduction EMCDDA, (EU) Percentage spent on demand reduction

(*) The number of observations reports the number of data records, taking into account the territory; countries and years available. The ratio compares the number of effectively reported observations with the total number of records, if no data were missing. Example: Europe (44) = 28/368: in Table 4, the conviction statistics of the European Sourcebook of crime and criminal justice statistics reports 28 data records, for the community sanctions imposed to drug offences in 2010, compared to the 368 data records that would exist if no data were missing, in the region Europe (which accounts with 44 countries).

► Page 31 Table 2 – Drug law offences

Data and Number of Dataset Type of information DATABASE Years Statistics observations(*)

Number Offences EU (30) = 364/600 of 1995-2014 offences Offender EU (30) = 262/600

Offences Use EU (30) = 230/300 2004-2013 by Types Supply EU (30) = 238/300

Total 2004-2013 EU (30) = 203/300

Cannabis Use EU (30) = 163/270 2005-2013 Supply EU (30) = 160/270

Total 2004-2013 EU (30) = 186/300

Heroin Use EU (30) = 159/270 2005-2013 Supply EU (30) = 160/270

Total 2004-2013 EU (30) = 185/300

Cocaine Use EU (30) = 159/270 2005-2013 Supply EU (30) = 176/270

Drug law Drug Law Total EMCCDA EU (30) = 50/270 offences Offences Crack Use (EU) 2005-2013 EU (30) = 47/270

Offences Supply EU (30) = 37/270 by drug Total EU (30) = 163/270

Amphetamine Use 2005-2013 EU (30) = 74/270

Supply EU (30) = 87/270

Total EU (30) = 98/270

Methamphetamine Use 2005-2013 EU (30) = 74/270

Supply EU (30) = 87/270

Total EU (30) = 162/270

Ecstasy Use 2005-2013 EU (30) = 144/270

Supply EU (30) = 153/270

Total EU (30) = 127/270

LSD Use 2005-2013 EU (30) = 108/270

Supply EU (30) = 95/270

Page 32 ► Public expenditure on supply reduction policies Table 3 – Prison population

Data and Number of Dataset Type of information DATABASE YEARS Statistics observations(*) Persons held in Availability of institutions for drug institutions for drug users offenders users offenders, 2014 CoE (47) =28/53 outside penal outside penal institutions institutions Population on 1st January Total number of prisoners (including pre-trial detainees) Total number of detainees held in remand institutions/ 2009: CoE (47) = 343/424 Situation of prison sections (pre-trials) 2009 & population 2014 2014: COE (47) = 255/265 Total number of prisoners held in institutions serving a sentence Total capacity of penal institutions Surface area per prisoner (m^2) Total number Evolution of prison CoE (47) = 707/795 of prisoners 2000-2014 population Space I, Prison Prison population CoE (47) = 683/795 Council of population Untried detainees Europe (CoE) (no court decision)” Detainees found guilty but no sentence yet Sentenced prisoners (appealed or can do so) Detainees with no final sentence, but serving a prison sentence in advance Legal status of 2009 & 2009: CoE (47) = 274/424 Sentenced prisoners prison population (final sentence), 2014 2014: CoE (47) = 315/477 of which: –– fine defaulters –– in revocation, suspension or annulment of the conditional release or probation Other cases Total number of prisoners (including pre-trial detainees)

Appendix 3 – Summary tables: data from international databases ► Page 33 Data and Number of Dataset Type of information DATABASE YEARS Statistics observations(*) Main offence of 2009 & sentenced prisoners Drug offences CoE (47) = 88/106 2014 (Final Sentence) Lengths of Length of the 2009 CoE (47) = 405/583 sentences imposed sentences by month, (final sentenced years or lifetime prisoners) 2014 CoE (47) = 557/689 Prison population Europe (44) = 387/414 Prison population Stock – Total (including pre-trial 2003-2011 Prison population European detainees): stock Sourcebook Europe (44) = 356/414 Pre-trial detainees of crime and criminal 2006 & Total criminal offences Europe (44) = 88/92 justice 2010 statistics, Convicted prison Drug offences 2010 Europe (44) = 38/46 population by (of which %) Université de type of offence Convicted prison Lausanne 2006 & population in 2010 Europe (44) = 46/92 2010 Drug offences: Total Sentenced persons Drug Offences Europe (26) = 49/81 UNODC 2010-2012 held in prisons Drug Trafficking Europe (26) =36/81

Page 34 ► Public expenditure on supply reduction policies Table 4 – Cases registered by the police, prosecutors and law courts

Data and Number of Dataset Type of information DATABASE YEARS Statistics observations(*)

Crime Total 1993-2007 Europe (36) = 536/585 Recorded by Unlawful acts involving Eurostat 1993-2007 Europe (36) = 486/585 the Police controlled drugs or precursors 2008-2014 Europe (39) = 275/287 Drug-Related Total Europe (40) = 215/258 Crimes at Drug Possession Europe (21) = 101/138 the national level, number UNODC 2003-2008 of police- Drug Trafficking Europe (37) = 175/240 Police recorded statistics offences Criminal Offences Europe (42) = 347/387 Offences Drug Offences Europe (42) = 333/387 Police Statistics- Drug Trafficking Europe (41) = 269/387 2003-2011 Offences/ Criminal Offenders Europe (42) = 263/396 Offenders Offenders Drug Offenders Europe (42) = 245/396 Drug Trafficking Europe (42) = 190/396 Output cases: Total Europe (42) = 218/396 Percentage brought before a court of the total output of 2003-2011 Europe (42) = 198/396 Criminal cases criminal cases handled by the handled by the prosecuting authorities prosecuting authorities Output Drug Offences Europe (42) = 33/88 cases by European 2010 offence Sourcebook group Drug Trafficking of crime Europe (42) = 25/88 and criminal Convictions Criminal offences justice Europe (42) = 293/369 Statistics- Drug offences statistics 2003-2011 Europe (42) = 272/369 Conviction Persons Drug trafficking Europe (42) = 193/369 statistics convicted 2006 Europe (41) = 203/473 Criminal offences 2010 Europe (41) = 176/602 Total persons receiving 2006 Europe (41) = 175/473 Drug offences sanctions/ 2010 Europe (41) = 158/602 measures 2006 Europe (41) = 113/473 Drug trafficking 2010 Europe (41) = 104/602

Community Criminal offences Europe (44) = 52/368 sanctions and 2010 measures imposed Drug offences Europe (44) = 28/368

Appendix 3 – Summary tables: data from international databases ► Page 35 Acronyms

Council of Europe (47) = CoE(47): Albania, Andorra, Europe (31): Austria, Belgium, Bulgaria, Croatia, Armenia, Austria, Azerbaijan, Belgium, Bosnia- Cyprus, Czech Republic, Denmark, Estonia, Finland, Herzegovina, Bulgaria, Croatia, Cyprus, Czech France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Republic, Denmark, Estonia, Finland, France, Georgia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Germany, Greece, Hungary, Iceland, Ireland, Italy, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Latvia, Liechtenstein, Lithuania, Luxembourg, Sweden, Turkey, United Kingdom Malta, Republic of Moldova, Monaco, Montenegro, Europe (36): Europe (31) + Liechtenstein, Montenegro, Netherlands, Norway, Poland, Portugal, Romania, TRF-Macedonia, Serbia, Turkey Russian Federation, San Marino, Serbia, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, “The Europe (37): Europe (21) + Republic of Moldova, former Yugoslav Republic of Macedonia”, Turkey, Russian Federation, Slovakia, Ukraine, Denmark, Ukraine, United Kingdom Estonia, Ireland, Bosnia-Herzegovina, Italy, Montenegro, Portugal, Serbia, Spain, TRF- Macedonia, European Union (30)= EU(30): Austria, Belgium, Germany, Monaco Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Europa (39): Europe (36) + Albania, Bosnia- Estonia, Finland, France, Germany, Greece, Hungary, Herzegovina, Kosovo Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Norway, Poland, Portugal, Romania, Europa (40): Belarus, Bulgaria, Czech Republic, Slovakia, Slovenia, Spain, Sweden, Turkey, United Hungary, Poland, Moldova, Romania, Slovakia, Kingdom Ukraine, Denmark, Estonia, Finland, Iceland, Ireland, Latvia, Lithuania, Norway, Sweden, United Kingdom, Europe (21): Belarus, Bulgaria, Czech Republic, Albania, Bosnia-Herzegovina, Croatia, Greece, Italy, Hungary, Poland, Romania, Finland, Iceland, Lithuania, Malta, Montenegro, Portugal, Serbia, Slovenia, Spain, Norway, Sweden, United Kingdom, Albania, Croatia, TRF- Macedonia, Austria, Belgium, France, Germany, Malta, Slovenia, Belgium, France, Liechtenstein, Liechtenstein, Luxembourg, Monaco, Netherlands, Luxembourg, Switzerland Switzerland Europa (41): Europa (42), except Luxembourg Europe (26): Bulgaria, Czech Republic, Poland, Romania, Europe (42): Europa (31) + Albania, Armenia, Bosnia- Russian, Denmark, Estonia, Finland, Ireland, Latvia, Herzegovina, Georgia, Kosovo, Moldova, Russia, Serbia, Lithuania, Norway, Sweden, United Kingdom, Andorra, TRF- Macedonia, Turkey, Ukraine Greece, Italy, Malta, Portugal, Serbia, Slovenia, Austria, Liechtenstein, Monaco, Netherlands, Switzerland Europe (44): Europe (42) + Azerbaijan, Montenegro

Table references

Aebi, M. F., Delgrande, N. (2011). SPACE I- Council EMCDDA. (2017). http://www.emcdda.europa.eu/ of Europe Annual Penal Statistics. Survey 2009. topics/drug-related-public-expenditure Strasbourg: Council of Europe Eurostat. (2017). http://ec.europa.eu/eurostat/data/ Aebi, M. F., Tiago, M. M. & Burkhardt, C. (2015). SPACE database?node_code=gov_10a_exp I- Council of Europe Annual Penal Statistics: Prison pop- UNODC. (2017). http://www.unodc.org/unodc/en/ ulations. Survey 2014.Strasbourg: Council of Europe data-and-analysis/statistics/crime.html EMCDDA. (2017). http://www.emcdda.europa.eu/ UNODC. (2017). http://www.unodc.org/unodc/en/ data/stats2015 data-and-analysis/statistics/crime.html

► Page 36 Evaluating drug policy is an integral part of a cost-efficient approach to tackle illicit drugs. This report takes a first step towards a systematic analysis, by examining a set of representative attempts to estimate public expenditure on supply reduction interventions. It proposes a common set of definitions, aiming to establish a common basis for understanding this topic and facilitating comparability in three main dimensions: time, policy and countries. Although it is mainly confined to supply reduction expenditures, in order to set the context, it describes the proportion that total drug- related expenditure represents of national public spending and; presents the balance between demand and supply reduction spending for a number of European countries. Finally, with the aim of facilitating and promoting future empirical expenditure studies and of setting the ground for the development of good practices, relevant data sources and methodologies applied are listed and discussed and examples of sectorial models of public spending are selectively provided. PREMS 062717

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The Council of Europe is the continent’s leading human rights organisation. It comprises 47 member states, 28 of which are members of the European Union. www.coe.int All Council of Europe member states have signed up to the European Convention on Human Rights, a treaty designed to protect human rights, democracy and the rule of law. The European Court of Human Rights oversees the implementation of the Convention in the member states.